TO ALL:
from Oppenhimer:
" VideoServer's stock weakened, declining almost 17%, on Feb. 13. While the stock may be down partly in sympathy with
Picture Tel (OTC-PCTL, $16 1/2, rated Outperform, Oppenheimer & Co., Inc., or one of its affiliated companies, makes a
market in this security), we believe the majority of this weakness is attributable to resurfacing confusion regarding
VideoServer's relationship with PictureTel along with new concerns that VideoServer's business has slowed significantly. We
view this weakness as a buying opportunity.
We reduced our PictureTel estimates to more closely reflect the growth rate of PictureTel's core business and an increase in
R&D; the reductions in no way affect our confidence in our VideoServer estimates.
As we have discussed in the past, VideoServer's growth is driven by the number of videoconferencing endpoints (i.e., group
and desktop systems) that are sold. We believe endpoint shipment rates are currently accelerating as supported by PictureTel's
4Q shipment result. In fact, PictureTel's group videoconferencing shipments almost doubled sequentially, from roughly 2,600
units in 3Q to approximately 5,000 in 4Q. With prices of group and desktop systems continuing to come down rapidly, we
expect this accelerating to continue.
Confusion over PictureTel's relationship with VideoServer has resurfaced yet again as people have interpreted PictureTel's
Feb. 12 comments -- that it is on plan to introduce a LAN-based server/gateway -- to mean that it will no longer need MCUs
from VideoServer. As we have said in the past, these are two separate products, and we believe the relationship is healthy. "
I think I'm buying more...
- John |
